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The Latest on the DOJ eBook Anti-Trust Suit

Today, the Department of Justice filed a response to the public comments on its settlement with three of the publishers in the case U.S. v Apple Inc., et al (also known as the price collusion case). They also established a webpage that has the response and all eight hundred and sixty comments submitted during the public comment period. I spent a little time today reading some of those comments (ok, skimming the legalese ones since they put handy summaries in the headings and at the end) and checking out the highlights of the government response. It’s a lot to take in, perhaps too much, and it paints radically different pictures of the eBook market future.

If you believe Apple, Barnes & Noble, and the Authors Guild, the lack of agency pricing would give Amazon an absolute and undisputed monopoly over the eBook market. This would be bad for consumers since Amazon has a low anti-competitive pricing structure and would be the source of eBooks for the market (attached to a proprietary platform but I didn’t see anyone make this particular point). It also imperils brick-and-mortar booksellers who could not compete with the loss-leader practices of Amazon, thus forcing them out of business and making the book playing field even smaller. Sure, the consumer would pay less now for eBooks, but there is less competitors to choose from.

(I thought it was strange, but I didn’t see anyone threaten to not sell their books through Amazon. If you really think it’s that unfair or unreasonable, find other ways to sell your books. I know this sounds a bit naïve, but these publishers have to be addicted to the ease at which Amazon moves their product and the money it generates despite all of these horrible conditions they proclaim.)

If you believe the government, Consumer Federation of America, Stephen Windwalker of the Kindle Nation Daily, and David Gaughran and the gaggle of writers who cosigned his letter, the agency pricing arrangement does immediate harm to the consumer by raising prices on eBooks. While it fends off the Amazon monopoly by preventing them from lowering prices as a loss leader for the rest of their business, this is not in the best interest of the consumer, but the retailers and publishers. It defies some of the basic concepts of a free market (that the market will determine the value of a product, for one) and hinders innovation by keeping old business practices and models on life support through artificial pricing schemes. The competition to construct and sell a better widget does not happen when the current widget is propped up as the ‘best standard’ for the field. In a sense, the consumers are harmed twice: first by the price raise, second by the lack of motivation to innovate.

This whole mess goes before a federal judge who is free to accept or reject this settlement; even then, there is the trial to follow for the non-settling parties. I’m going to be cheering for The Man on this one; while the eBook market may be nascent, it’s not right to stifle its direction or growth in order to preserve a status quo that trades normal market inequalities for artificial ones. It’s going to be a long bumpy road on this one, though by the time it ends, the findings might be moot in the face a completely different market landscape. This case is one to follow, but it’s in the long run.

Amazon’s “absolute and undisputed monopoly over the eBook market” is entirely the publishers’ fault: specifically, their refusal to sell ebooks without DRM. Amazon is only able to get away with its pricing because it knows that every locked-in Kindle ebook purchased makes it that less likely that a customer will get anything but a Kindle next time they buy an ereader, which means they will keep buying Kindle ebooks, so on an so forth. If publishers were to allow ebooks sold without DRM, though Amazon might still try to maintain their lock-in, it would free other retailers to sell DRM-free ebooks that, hopefully, consumers would start to prefer since they would have the freedom to shop at-will rather than deal with lock-in.

I hate DRM eBooks! I have a nook, and it drives me crazy that I can’t shop anywhere but on bn.com. eReaders should support books from bn.com, amazon.com, or any other merchant who wants to sell ebooks! IMHO, at least.